As the 2025 open enrollment period beings, California residents are facing an important financial question that extends far beyond health insurance – what happens if federal premium tax credits expire?
At Wilson Tax Law Group, APLC, we are closely monitoring this issue because it carries significant implications for tax planning, cash flow management, and compliance for both individuals and business owners across the state.
The premium tax credit, originally expanded under the American Rescue Plan and later extended by the Inflation Reduction Act, has helped approximately more than 1.7 million Californians with seeking access to health coverage through the Covered California marketplace. These credits effectively reduce monthly premiums by applying an advance payment of a federal tax credit.
However, unless Congress acts to renew these provisions, those credits could expire soon, meaning that many Californians could see their premiums nearly double in the coming year. While this change originates in health policy, it directly affects taxpayers adjusted gross income (AGI), itemized deductions, and estimated payments. These are key components of taxpayers’ overall tax strategy.
From a legal and planning standpoint, this is a reminder that tax law and public policy are deeply interconnected. The loss of these credits would not only make coverage less affordable but also complicate tax reporting and reconciliation. This could place a huge financial burden on those taxpayers who received advanced premium payments in prior tax years.
Under the guidance of a trusted tax attorney, we recommend the following action items:
- Reviewing your 2025 income projections and determine if any adjustments to withholding or estimated payments are required.
- Schedule time with your tax attorney and advisor early to evaluate adjusted gross income changes and deductions.
- Stay updated on both IRS (Federal) and Covered California (State) guidance and announcements, as policy developments could unfold quickly.
At Wilson Tax Law Group, APLC, we help clients anticipate and adapt to these kinds of changes so you can make proactive decisions before they affect your bottom line. For assistance navigating the tax implications of health insurance changes, please contact our office to schedule a consultation with our firm. We cannot stop Congress from debating your health credits, but we can make sure your tax plan does not get burned in the process. When it comes to taxes, there is no such thing as a “we’ll see what happens” strategy.
If you have any questions regarding your individual or businesses’ state and/or federal tax return(s)/tax liabilities or received a notice from the IRS, FTB, EDD, CDTFA or any other regulatory agency, please call or email Wilson Tax Law Group, APLC, to setup a consultation with our firm.
Wilson Tax Law Group, APLC is a boutique Orange County tax controversy law firm that specializes in representation of individuals and businesses before federal and state tax authorities with audits, appeals, FBAR, offshore compliance, litigation and criminal defense. Firm founder, Joseph P. Wilson, is a former Federal tax prosecutor and trial attorney for the IRS and California Franchise Tax Board. Wilson Tax Law Group, APLC, is comprised of former IRS litigators & Special Agents, and Assistant US Attorneys from the US Attorney’s Office, Central District of California, Tax Division, which at the time handled both civil tax lawsuits and criminal tax prosecutions on behalf of the United States of America.
For further information, or to arrange a consultation please contact: Wilson Tax Law Group, APLC
Tel: (949) 397-2292 (Newport Beach Office)
Tel: (714) 463-4430 (Yorba Linda Office)
Disclaimer: This blog post is for informational purposes only and does not constitute legal, tax or financial advice. Please consult with a qualified attorney, accountant or financial advisor for specific guidance related to your circumstances.
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